SEC fines ‘dark pool’ firm $1m for undisclosed trading

25 October 2011

Dark pool trading firm Pipeline has been fined $1 million by the Securities and Exchange Commission (SEC) for failing to disclose that trading orders were processed by an affiliate operation.

The alternative trading system agreed to pay the settlement penalty without admitting or denying the findings of the SEC.

Fred J Federspiel, Pipeline’s founder and chief executive officer (CEO) and Alfred R Berkeley, previous CEO and current chairman, both agreed to pay $100,000 each to settle the matter without admitting or denying any wrong doing.

According to the SEC, Pipeline’s claims that it provided a crossing network with natural liquidity were false as a trading platform owned by its parent company filled the majority of its orders.

Robert Khuzami, director of the SEC’s Enforcement Division, said: “Investors are entitled to accurate information as to how their trades are executed. Pipeline and its senior executives are being held to account because they misled their customers about how Pipeline’s dark pool really worked.”

Dark pool platforms are alternative trading bodies which provide little or no information about customer orders.

By Jim Ottewill

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